Merging IT as a way of life

Though many IT chiefs are keen to have a merger under their belts, bringing disparate sets of technologies together is far from easy, particularly in this challenging economic climate.

Take Paul Coby, chief information officer (CIO) at British Airways as an example. He is now in the process of mobilising the technology strategy for the merger with Spanish carrier Iberia while having to live by the motto ‘doing even more with even less’.

Last week, the FT reported on a major management reshuffle at Porsche intended to address key strategic objectives, integration with Volkswagen being a key task.

Merging operations is crucial to the debt-ridden luxury car maker, which is half-owned by VW. That is because Porsche needs to gain closer access to technology and systems from its parent in order to achieve operational synergies and meet tough emissions and fuel economy regulations.

Generating cost and operational synergies is a must when merging two sets of technologies, but are there any rules of thumb for IT leaders overseeing such a mission? Recently I was talking to former BNP Paribas CIO Paul Camille Bentz about that subject and he gave me a few soundbites.

Bentz – who handled other technology mergers at firms including French insurance giant AGF Group and is now a consultant at supplier Cast Software – said that CIOs in merger situations need to follow a very strict methodology and can’t do it all themselves, ‘unless they have been doing mergers as a way of life’.

Some of his top tips to CIOs working on technology mergers include:

1. Know your figures: “If you don’t have good figures to support you through a merger, you are lost. This includes people, budgets, systems, contracts. I have been through that process and know that this is crucial so the office of the CIO can make educated decisions;

2. Select the right people: “You need to create a structure and place the right people in the right roles, otherwise you will have people working in ‘tribes’, and that can hamper productivity;

3. Avoid creating development plans immediately: “In most cases, you lose people when you announce your first nominations. You must have succession planning but avoid introducing it straight away”;

4. Provide the right tools: “You need to give your staff the appropriate means to do their job, including application intelligence and project methodologies.”

What are your ‘merger rules’? I would be interested in hearing the views of leaders who have worked on such projects.

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Mergers and acquisitions once involved many months of due diligence and careful planning for the two (or more) parties to determine how to ensure collaborative fit, profitable growth and rationalised assets and overheads. However, the recession has meant that many mergers and acquisitions over the last few years have become survival tactics rather than long-term investment strategies. Whatever the timescale allowed, a key requirement is to maintain ‘business-as-usual’ - to make sure that the merged organisations do not lose customers through poor service and market perception that future reliability is at risk. To maintain ‘business-as-usual’ in the consolidated enterprise, and deliver post-merger revenue benefits, ripping and replacing systems is not a realistic option, as both costs and operational risks would be prohibitive. M&A events give CIOs an opportunity to take a fresh look at optimising their existing technology. Considerations include: • Consolidating the financial and operational management of the merged enterprises into one preferred suite of central systems without invasively impacting the separate source systems • Bringing out-sourced services back in-house • Offering strong in-house processing solutions as outsourced services to competitor companies • Maintaining the launch of new portfolio products that had reliable pre-merger business cases To address these considerations, the CIO’s reality-check breaks down into two steps: 1. I have technology infrastructure legacies from (at least) two companies. 2. By using current business process integration technology how can I:... • Provide my executive colleagues consolidated and effective control over their expanded domain? • Extend the life of what I have? • Expand the business usage of what I have? • Reduce my operating costs? • Help to maintain and grow revenue? Well-judged and well-executed answers to these questions will make substantial contributions towards successful M&As.